Hope for headless fund house: Jitesh Khosla out of the race as UTI AMC hunts for a new chief

The shareholders of UTI Asset Management Company, with the backing of the government, have decided to start afresh the process of appointing a new CEO after a rumpus over the selection of a bureaucrat - who was not shortlisted for the job - left the fund without a full-time head for over 15 months.

At a recent meeting, the government told the state-run shareholders of the asset management firm - State Bank of India, Life Insurance Corp, Punjab National Bank and Bank of Baroda - to start the process of selecting a successor to UK Sinha without involving a head-hunting firm, as was done earlier, said two people familiar with the developments.

After Sinha left UTI AMC in February 2011 to head the Securities &, the process of appointing a new CEO got vitiated when the fund's largest shareholder, Baltimore-based investment management firm T Rowe Price with 26% stake, protested alleged attempts to influence the selection process to favour bureaucrat Jitesh Khosla.

The protests centered around the fact that the IAS officer, who has worked in the finance ministry and is closely related to Omita Paul - the advisor to Finance Minister Pranab Mukherjee, was reportedly being backed by the government though he was not shortlisted by the executive search firm Egon Zehnder.

Omita Paul had, in a previous interview to ET, strongly denied that she was trying to influence the UTI CEO's selection. The institutional investors had alerted the government to the possibility of a protracted litigation or probe if it went ahead with the appointment of a candidate who was not on the head hunter's list.

This time, the selection process will be led by the board of UTI AMC and indications are that Khosla's name may not crop up, said a senior official who declined to be named. Earlier this year, the board appointed an interim chief executive to steer the mutual fund.

All stakeholders of UTI AMC and the government now appear to have recognised that the controversy over the CEO's appointment had taken a toll on the firm, whose assets fell 10% between January 2011 and March 2012. UTI AMC had assets under management of Rs 58,922 crore at the end of March this year. The board of the fund house, which met recently, sought to pin the blame on chief marketing officer Jaideep Bhattacharya, who put in his papers on Friday.

The official quoted earlier said the plan now is to invite applications from professionals through a transparent process, which would be endorsed by the board.